FINRA alerts firms about rising ACATS fraud

Federal Issues Financial Crimes Privacy, Cyber Risk & Data Security Fraud FINRA Identity Theft Bank Secrecy Act Anti-Money Laundering

On October 6, FINRA issued Regulatory Notice 22-21, alerting member firms to the rising trend of fraudulent account transfers of customer accounts using the Automated Customer Account Transfer Service (ACATS)—an automated system that facilitates the transfer of customer account assets from one member firm to another. FINRA explained that “ACATS fraud is related to the growing threat of new accounts being opened online or through mobile applications using stolen or synthetic identities,” and may occur when the identity of a legitimate customer of a carrying member is stolen by a bad actor to open a brokerage account online or through a mobile app at a receiving member. Bad actors, FINRA warned, may open a new account using stolen information only or through a combination of stolen and false information, and will try to move the ill-gotten assets to an external account at a different financial institution. FINRA reminded members of regulatory obligations that may apply to ACATS fraud, including know-your-customer rules, Bank Secrecy Act/AML requirements, and the Identity Theft Red Flags Rule.